Need to Know: ‘Hold the epitaphs’—this aging economic cycle has another year left, says strategist

Need to Know: ‘Hold the epitaphs’—this aging economic cycle has another year left, says strategist

12 Dec    Finance News

Investors are basking in some relief after the Federal Reserve indicated interest rates probably won’t go up in 2020, at least for now.

Alas, there are other loose ends to tie up as the year winds down, such as trade—we still don’t know if Sunday’s China tariffs will go ahead. A lingering risk for some—Brexit—may finally see movement as the U.K.’s General Election gets under way.

Onto a cheery call of the day—after all, it’s the holiday season.

“Hold the epitaphs—this aging [economic] cycle seems likely to last beyond 2020,” says asset manager Russell Investments in its 2020 global outlook.

To be sure, Wall Street is getting more comfortable with the idea that a U.S. and global recession could be averted next year, thanks to some better-than-expected data.

Andrew Pease, global head of investment strategy at Russell Investments, tells clients that central bank easing, a de-escalating trade war and potential green shoots for global manufacturing “suggest we might be on the cusp of another ‘mini-cycle’ recovery through the first half of 2020.”

Pease says that means equities should outperform bonds, but non-U.S. stocks will be a better bet than Wall Street equities because they are more cyclical in nature—that is, they are more sensitive to economic developments. And echoing sentiments elsewhere, Russell says valuations have climbed a lot for U.S. stocks, so it prefers less pricey emerging markets, for example.

Note, JPMorgan just released its big calls for 2020, telling clients to stay overweight on equities, but urging them to look outside the U.S.

“Emerging markets have lagged all major indexes this year and positioning doesn’t appear stretched anymore. We think this is a good entry point for the trade,” says Mislav Matejka, head of global and European equity strategy, in a note.

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The rationale is improved China data, the potential for a trade truce supporting emerging market equities, the likelihood of a softer dollar and steadier global growth, says Matejka.

The market

The dollar DXY, -0.29% is indeed down, post Fed.

Dow DJIA, +0.53%, S&P SPX, +0.47% and Nasdaq COMP, +0.43%  futures have turned lower as jobless claims jumped. European stocks SXXP, -0.19% is wobbling as the European Central Bank left its policies unchanged. The first press conference for Christine Lagarde as president is underway.

Read: International Energy Agency sees climbing oil inventories next year

Sterling GBPUSD, -0.2880% is slipping as U.K. voters head to the polls. Prime Minister Boris Johnson’s sizable lead was slashed in the final opinion surveys before today’s vote, which could make the election a close one.

The chart

Deutsche Bank’s fairly newish monthly poll reveals pretty bullish attitudes out there for stocks. Some 53% think the S&P 500 SPX, +0.47%  will be higher in three months, versus 21% who see stocks lower. In 12 months, 39% see stocks higher and 46% lower.

The buzz

Weekly jobless claims have hit a more-than-two year high. Producer prices were flat and data on household net worth is still to come.

A handful of results are en route, from chip group Broadcom AVGO, +2.64%, retailer Costco COST, +0.14%  and software makers Oracle ORCL, -0.52%  and Adobe ADBE, +0.43%. Lululemon Athletica LULU, -5.66%  shares are down on disappointing results from the apparel maker.

Disney’s DIS, +0.21%  streaming service—Disney +—has been downloaded 22 million times, good news for the studio that could be the first to earn $10 billion in a year at the global box office.

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Saudi energy group Aramco 2222, +0.00%  surged on its second day of trading, topping a $2 trillion valuation.

Weekly jobless claims, producer prices and data on household net worth are coming.

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